South Dakota’s revenue projections point to possible trouble for schools to maintain the proposed one percent increase in funding for next year.
Legislative appropriators adopted revenue projections coming in at $27.7 million less than what was proposed during December’s budget address. The main culprit of the reduction in revenue was the state’s sales and use tax, which was $24 million lower than the figure proposed in December.
“Collection activity has been lower than anticipated,” S.D. Bureau of Finance and Management Deputy Director Jim Terwilliger told appropriators; who adopted the revenue estimates based on a culmination of figures presented to them by BFM – via Terwilliger – and the S.D. Legislative Research Council, through Fiscal Analyst Jeff Mehlhaff.
The drop in revenue sets up a scenario in which South Dakota’s public schools receive less than a one percent increase in state aid.
At his December budget address, Gov. Dennis Daugaard proposed the one percent increase in funding for schools, but lean revenue collections may drive that number down closer to 0.3 percent, which is where inflation came in at and is the mandatory figure prescribed by law for schools to receive.
“The revenue figures are obviously a big concern and they open the door for less money for schools,” ASBSD Executive Director Wade Pogany said. “Right now, it’s a real possibility that schools receive the inflation figure because currently there’s not room in the budget for more.”
Increases to the state’s largest ongoing expenses of education, medical providers and state employees were projected to cost just less than $20 million, which, even in the unlikely scenario all were frozen, still leaves a nearly $7 million hole to be filled by the revenue shortfall.
Terwilliger noted that sales tax has been “down on average of $3 million a month” since December. It’s a gap at the moment not certain to be made up by the recent development of collection of sales tax and remission to the state by online retailers such as Amazon.
At legislative committee meeting in January, Department of Revenue Secretary Andy Gerlach told committee members, “Knowing that long term it’s (the agreement) going to pay off…I would urge the legislature to be conservative (in initial expectations).”
With uncertainty abound, other options are likely to be explored to ensure statutory requirements of the state and the budget are met and schools must stay vigilant in the funding conversation in the instance action is needed.
“We’re going to work closely with the appropriators in the hopes we can receive funding above inflation and we’ll need our board members and administrators on alert to contact their legislators to advocate for funding,” Pogany said.
“There’s still three weeks of session so we’ve still got time to make our case.”